MGMT 480 EXAM QUESTIONS WITH VERIFIED SOLUTIONS LATEST UPDATE 2026
Contract Definition - Answers A voluntary exchange of promises, creating obligations that, if
defaulted on, can be enforced and remedied by the courts.
Freedom of Contract - Answers Parties can enter into almost any type of contract they choose as long
as it meets common law requirements.
Consensus - Answers Mutual agreement to commit themselves to the terms.
Consideration - Answers A commitment by each party to do or abstain from doing something; it is the
price each side is willing to pay.
Capacity - Answers Each party must be legally capable of understanding and entering into the
agreement (e.g., infants, intoxication).
Legality - Answers The object of the contract must be legal and not against public policy.
Intention - Answers Both parties must intend that legally enforceable obligations will result from the
agreement.
Verbal Agreements - Answers Just as binding as written agreements, except for those required to be
in writing by the Statute of Frauds.
Express Contract - Answers A contract where the terms are expressly set out.
Implied Contract - Answers A contract inferred from the actions of parties, such as putting money in a
vending machine.
Void Contract - Answers An element is missing so the contract is not legally binding; goods must be
returned to the seller.
Voidable Contract - Answers Exists and has legal effect, but one of the parties has the right to
terminate the contract.
Unenforceable Contract - Answers One that is required to be in writing pursuant to the Statute of
Frauds and is not.
Illegal Contract - Answers Involves the performance of an unlawful act and is void; courts will
generally not assist in returning parties to original positions.
Bilateral Contract - Answers Involves an exchange of promises where both parties have obligations
and commitments.
Unilateral Contract - Answers A promise followed by an act, such as an offer of a reward for a lost
item.
Meeting of the Minds - Answers Shared agreement; failing to read or understand a contract is not
recognized as a legal excuse.
Offer - Answers Contains all of the terms to be included in a contract; only needs consent or denial
from the other party.
Invitation to Treat - Answers An offer to the world at large to enter negotiations (like an ad); it is not
a binding offer.
Offer by Conduct - Answers Inferred by behavior, such as bringing goods and money to a cashier in a
store.
Communication of Offer - Answers An offer must be communicated to the party accepting it; you
cannot accept an offer you did not know about.
End of Offer - Answers Occurs via end of specified time, death/insanity, revocation, rejection,
counteroffer, or destruction of goods.
Acceptance - Answers An 'all or nothing' proposition where the contract is formed; adding terms
creates a counteroffer.
Silence as Acceptance - Answers Not usually considered acceptance unless there is an ongoing
business relationship where it is inferred.
Postbox Rule - Answers Acceptance is effective when and where it is dropped in the postbox.
Gratuitous Promise - Answers A one-sided agreement where only one side has obligations; it is not
enforceable.
Past Consideration - Answers Adequate consideration is not found in acts that occurred before the
promise was made.
Illegal Consideration - Answers Not good consideration; for consideration to be valid, it must be
possible to perform.
Quantum Meruit - Answers A court-imposed obligation to pay a reasonable price for services.
Capacity Definition - Answers The legal entitlement of a person to enter into a binding contract;
certain categories of people receive special protection from the courts[cite: 138, 139].
Contract Definition - Answers A voluntary exchange of promises, creating obligations that, if
defaulted on, can be enforced and remedied by the courts.
Freedom of Contract - Answers Parties can enter into almost any type of contract they choose as long
as it meets common law requirements.
Consensus - Answers Mutual agreement to commit themselves to the terms.
Consideration - Answers A commitment by each party to do or abstain from doing something; it is the
price each side is willing to pay.
Capacity - Answers Each party must be legally capable of understanding and entering into the
agreement (e.g., infants, intoxication).
Legality - Answers The object of the contract must be legal and not against public policy.
Intention - Answers Both parties must intend that legally enforceable obligations will result from the
agreement.
Verbal Agreements - Answers Just as binding as written agreements, except for those required to be
in writing by the Statute of Frauds.
Express Contract - Answers A contract where the terms are expressly set out.
Implied Contract - Answers A contract inferred from the actions of parties, such as putting money in a
vending machine.
Void Contract - Answers An element is missing so the contract is not legally binding; goods must be
returned to the seller.
Voidable Contract - Answers Exists and has legal effect, but one of the parties has the right to
terminate the contract.
Unenforceable Contract - Answers One that is required to be in writing pursuant to the Statute of
Frauds and is not.
Illegal Contract - Answers Involves the performance of an unlawful act and is void; courts will
generally not assist in returning parties to original positions.
Bilateral Contract - Answers Involves an exchange of promises where both parties have obligations
and commitments.
Unilateral Contract - Answers A promise followed by an act, such as an offer of a reward for a lost
item.
Meeting of the Minds - Answers Shared agreement; failing to read or understand a contract is not
recognized as a legal excuse.
Offer - Answers Contains all of the terms to be included in a contract; only needs consent or denial
from the other party.
Invitation to Treat - Answers An offer to the world at large to enter negotiations (like an ad); it is not
a binding offer.
Offer by Conduct - Answers Inferred by behavior, such as bringing goods and money to a cashier in a
store.
Communication of Offer - Answers An offer must be communicated to the party accepting it; you
cannot accept an offer you did not know about.
End of Offer - Answers Occurs via end of specified time, death/insanity, revocation, rejection,
counteroffer, or destruction of goods.
Acceptance - Answers An 'all or nothing' proposition where the contract is formed; adding terms
creates a counteroffer.
Silence as Acceptance - Answers Not usually considered acceptance unless there is an ongoing
business relationship where it is inferred.
Postbox Rule - Answers Acceptance is effective when and where it is dropped in the postbox.
Gratuitous Promise - Answers A one-sided agreement where only one side has obligations; it is not
enforceable.
Past Consideration - Answers Adequate consideration is not found in acts that occurred before the
promise was made.
Illegal Consideration - Answers Not good consideration; for consideration to be valid, it must be
possible to perform.
Quantum Meruit - Answers A court-imposed obligation to pay a reasonable price for services.
Capacity Definition - Answers The legal entitlement of a person to enter into a binding contract;
certain categories of people receive special protection from the courts[cite: 138, 139].
